lessee incurred costs to construct office space in a leased warehouse. The estimated useful life of the office is ten years. The remaining term of the renewable lese is fifteen years. The cost should be a. capitalized as leasehold improvements and expensed in the year in which the lease expires. b. capitalized as leasehold improvements and depreciated
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A lessee incurred costs to construct office space in a leased warehouse. The estimated useful life of the office is ten years. The remaining term of the renewable lese is fifteen years. The cost should be
a. capitalized as leasehold improvements and expensed in the year in which the lease expires.
b. capitalized as leasehold improvements and
c. capitalized as leasehold improvements and depreciated over ten years.
d. expensed as incurred.
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